Shell Bets on a Colossal Floating Liquefied Natural Gas Factory Off Australia

From New York Times

By Stanley Reed

At a shipyard on a South Korean island called Geoje, an army of welders and metal cutters is beginning to assemble what is by many measures the largest ship ever made.

It will span 488 meters, or about 1,600 feet — about one-third longer than the longest United States aircraft carriers. The vessel, the first of its type, will spend much of its time in one place, over a natural gas field called Prelude, about 120 miles off the coast of Australia. The gargantuan craft’s majority owner is Royal Dutch Shell. Minority partners include Korea Gas.

Perhaps more than any of its rivals, Shell has bet its future on natural gas. That is where the giant ship fits in. It will house what is usually a huge, land-based apparatus for chilling natural gas to minus 260 degrees Fahrenheit to liquefy it so it can be transported by another specialized ship.

Shell has equity stakes amounting to about 30 percent of the world’s liquefied natural gas volume, according to the company. Gas used to be sold through fixed contracts, but fast-growing liquefied natural gas is making it into a commodity like oil that can be shipped just about anywhere. Prelude should help the company further expand that franchise.

Since the 1990s, Shell and other companies have explored putting liquefied natural gas factories on ships, a concept that has the dual advantage of reaching remote locations and avoiding the environmental concerns of land construction. In those years, Shell considered floating factories for a field called Kudu, off Namibia in West Africa, and another called Nwa/Doro, off Nigeria. Neither project came to fruition.

When Shell discovered a gas field in an area called the Browse Basin off northwestern Australia in 2007, it thought it finally had the right place.

The Prelude field and one nearby called Concerto are big but not monsters. Each contains about three trillion cubic feet of gas reserves — about what Britain consumes in a year.

That figure is below the rule of thumb of five or six trillion cubic feet that has been thought to be the minimum to warrant constructing an onshore processing plant. Prelude’s distance from shore also argued for putting the processing on a ship rather than on land.

“The size and remote location makes an ideal development for floating L.N.G.,” says Marjan van Loon, a Shell vice president for liquefied natural gas.

When the hull and another huge piece of equipment called the turret, being built in Dubai, are finished, they will be towed to the gas field and fixed there by huge anchor cables. Prelude is expected to start producing by 2017; it could be beaten to market by other entries like one by Petronas, the Malaysian oil company.

The vessel, which will be able to house as many as 400 people, is expected to remain on the site for 25 years. Then, after refurbishment, it could be recycled for use at another field.

When oil companies and others first started thinking about building floating liquefied natural gas facilities, the idea was to build low-cost, relatively nimble machines. The thought was that they could be built and financed by third parties and rented out to oil companies.

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